The effects of uncertainty about countries’ compliance with the Stability and Growth Pact
AbstractThe Stability and Growth Pact (SGP) was established to govern discretionary fiscal policy in the European Monetary Union. This article studies the effects created when there is uncertainty about the members’ commitment to respecting the established deficit limits in the SGP. We will show that, even if countries respect the SGP deficit ceiling, the presence of uncertainty about their compliance will bring about higher volatility in key economic variables, which could, in turn, affect unemployment and growth negatively. This finding shows that it is important to reduce uncertainty about the members’ commitment towards the SGP.
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Bibliographic InfoArticle provided by Elsevier in its journal Journal of Policy Modeling.
Volume (Year): 34 (2012)
Issue (Month): 5 ()
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Web page: http://www.elsevier.com/locate/inca/505735
Fiscal policy rules; Monetary union; Stability and Growth Pact; Uncertainty; Commitment;
Other versions of this item:
- Ferré Carracedo, Montserrat, 2011. "The effects of uncertainty about countries' compliance with the Stability and Growth Pact," Working Papers 2072/169686, Universitat Rovira i Virgili, Department of Economics.
- E63 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Comparative or Joint Analysis of Fiscal and Monetary Policy; Stabilization; Treasury Policy
- F55 - International Economics - - International Relations and International Political Economy - - - International Institutional Arrangements
- H62 - Public Economics - - National Budget, Deficit, and Debt - - - Deficit; Surplus
- H87 - Public Economics - - Miscellaneous Issues - - - International Fiscal Issues; International Public Goods
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